| I'm Chris Anstey, an economics editor in Boston. Today we're looking at the Fed's new economic outlook. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here. - President Donald Trump said the Federal Reserve should cut interest rates, splitting with the US central bank as officials weigh the economic cost of his tariff push.
- An influx of Chinese goods across emerging economies such as Indonesia is wiping out jobs in industries such as textiles and apparel. Read the Big Take here.
- Brazil's central bank hiked rates, Switzerland cut and Sweden held. Later today, central banks in the UK and South Africa may keep borrowing costs unchanged.
Fed Chair Jerome Powell, among others, infamously deemed the run-up in prices that began in spring 2021 a "transitory" phenomenon that wouldn't send inflation higher over the longer haul. By the end of that same year, with costs continuing to accelerate, he said it was "probably a good time to retire that that word." "The 'good ship transitory' was a crowded one," Powell said last August, when he gave a review of how inflation went on to broaden out and require the most aggressive monetary tightening in decades. Today, the Fed's preferred price gauge shows core inflation still, at 2.6%, not yet back to the 2% target. With that context, it was surprising to some observers that Powell on Wednesday said that his "base case" is for the tariff increases that the Trump administration is imposing to have a transitory impact on inflation. That's what happened last time, he said, referring to Trump's 2018 rounds of tariff increases. It's true that "it's a different time now," and it's unknown how things will work out going forward, Powell also said. But for now, Fed policymakers retained a median forecast for two interest-rate cuts by year-end. There's "broadly speaking weaker growth but higher inflation — and they kind of balance each other out," Powell said.  Fed Chairman Jerome Powell speaks during a news conference in Washington. Photographer: Al Drago/Bloomberg "He was pretty reassuring to people that this was all quite manageable," said former New York Fed President William Dudley, who's now a Bloomberg Opinion contributor. Dudley also noted that Powell played down recent data showing a slide in consumer sentiment, in favor of "hard data" that remained — in the Fed chair's view — "pretty solid" still. Powell proved so reassuring that the S&P 500 Index closed more than 1% higher Wednesday, with Treasuries also rallying. "The reality is they're flying blind," Dudley said. The extent of the tariff hikes isn't yet known, let alone their impact on the economy. Trump is planning a package of reciprocal import duties he's dubbed "the big one" for April 2. For now, the median Fed policymaker forecast is for core inflation to run at 2.8% at year-end, with GDP slowing to 1.7% year-on-year in the fourth quarter — less than half the 2024 expansion. Powell assured that "our policy is in a good place to react to what comes." "We think that the right thing to do is to wait here for greater clarity about what the economy is doing." The Best of Bloomberg Economics | - UK wage growth held at its highest level in nine months and employment rose, evidence of resilient demand for workers.
- Australian employment surprisingly dropped in February, sending the currency and government bond yields lower as traders boosted bets on further interest-rate cuts.
- Colombian President Gustavo Petro is close to naming Germán Ávila, the head of the country's state-run banking group, as his next finance minister.
- Finland's unbroken streak as the world's happiest country continued for an eighth year while the US fell to 24th place, its lowest-ever level in the global ranking.
- South Korean marriages increased the most on record in a hopeful sign for a nation that has been ramping up efforts to boost the world's lowest fertility rate.
- Finally, here's why it's so hard to measure AI's effects on productivity.
Back in November's press briefing, Powell said that the White House wasn't able to remove Fed leadership under the law. But a new legal case has just emerged that could potentially have bearing on that assessment, according to David Wilcox, a former senior Fed official. Trump on Tuesday fired two Democratic members of the Federal Trade Commission, in an historical echo of Franklin Delano Roosevelt's removal of an FTC member back in 1933. That case went into litigation, and the Supreme Court in 1935 found that in certain situations it was constitutional for Congress to restrict the president's ability to fire.  The US Supreme Court in Washington, DC, US, Jan. 17, 2025 Photographer: Al Drago/Bloomberg "Trump's move against the FTC commissioners raises anew the question of whether Congress can restrict a president's ability to fire," Wilcox, now director of US economic research at Bloomberg Economics, wrote in a note Wednesday. "We expect the question to come to an early test before the Supreme Court." If the top court strikes down the 1930s finding, "the independence of the Federal Reserve could be at serious risk." - F0r Wilcox's full note on the Bloomberg terminal, click here.
| 
No comments:
Post a Comment